Key View

• The resignation of Sri Lanka's president and prime minister will lead to an interim opposition-led unity government, which will enjoy somewhat greater political capital to implement a potential deal with the IMF.
• However, shortages of fuel, power, and foreign currency will continue in the immediate term, which will keep protest risks

Key View

• Exhausted foreign currency reserves risk medicine shortages in Sri Lanka.
• Escalating inflationary pressures will negatively impact pharmaceutical sales.
• Economic recovery will be delayed amid a volatile political outlook.

We at Fitch Solutions expect Sri Lanka’s economy to contract by 0.5%, from 3.2% growth previously as the

Key View

• The CBSL opted to keep the SDFR and the SLFR at 13.50% and 14.50%, respectively, at its May 18 meeting.
• We continue to expect further rate hikes by the CBSL to rein in rising inflationary pressure and to support the LKR, and maintain our forecast for the SDFR and SLFR to end the year at 16.50% and 17.50%, respectively.
• We have

Key View

• We at Fitch Solutions expect continued political uncertainty in Sri Lanka following the resignation of Prime Minister Mahinda Rajapaksa on May 9 2022.
• The volatile political outlook continues to make it difficult for Sri Lanka to obtain timely external financing from the IMF or attract foreign investments, potentially worsening the

Key View

• We at Fitch Solutions now expect Sri Lanka’s economy to contract by 0.5%, from 3.2% growth previously as the balance of payments crisis results in a recession.
• While the economy rebounded in Q421 following a contraction in the previous quarter, and brought full-year growth figure to 3.7% in 2021, we expect weakness ahead.
• Persistent

Key View

• Following the Central Bank Of Sri Lanka’s (CBSL) move to hike the Standing Lending Facility Rate (SLFR) and the Standing Deposit Facility Rate (SDFR) by 700bps at its meeting on April 8 to 14.50% and 13.50%, respectively, we have revised our end-2022 forecast for the SLFR to 17.50% and SDFR to 16.50%.
• Meanwhile, we have revised our

Key View

• Following the Central Bank Of Sri Lanka’s (CBSL) January 20 meeting in which it opted to hike the Standing Deposit Facility Rate (SDFR) and the Standing Lending Facility Rate (SLFR) by 50bps to 5.50% and 6.50% respectively, we at Fitch Solutions expect a further 50bps worth of hikes, taking the SDFR and SLFR to 6.00% and 7.00%

Key View

• We at Fitch Solutions have revised up our 2021 real GDP growth forecast for Sri Lanka to come in at 4.2% (from 4.0% previously) and expect growth in 2022 to come in at 4.4%.
• We expect the activity in the industrial sector to normalise but growth will likely be capped due to a moderating export outlook, increased cost of inputs and

Key View

• Sri Lanka’s healthcare market has significant growth potential.
• Financial backing from the Asian Development Bank will boost the success of Sri Lanka’s healthcare reform project.
• Despite the government's investment in the healthcare sector, the country will remain a relatively unattractive market for foreign investors.

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